Fidelity® GNMA Fund
Annual Report
July 31, 2020
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Contents
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All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. © 2020 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, the U.S. government took unprecedented action – in concert with the U.S. Federal Reserve and central banks around the world – to help support consumers, businesses, and the broader economy, and to limit disruption to the financial system.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of distributions from dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The hypothetical investment and the average annual total returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
| For the periods ended July 31, 2020 | Past 1 year | Past 5 years | Past 10 years |
| Fidelity® GNMA Fund | 4.71% | 2.66% | 2.91% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® GNMA Fund on July 31, 2010.
The chart shows how the value of your investment would have changed, and also shows how the Bloomberg Barclays GNMA Index performed over the same period.
| Period Ending Values |
| $13,323 | Fidelity® GNMA Fund |
| $13,317 | Bloomberg Barclays GNMA Index |
Management's Discussion of Fund Performance
Market Recap: U.S. taxable investment-grade bonds rose strongly for the 12 months ending July 31, 2020, led by healthy demand for corporate bonds from April through July, as fixed-income markets recovered from a strong sell-off in March related to the spread of the coronavirus. The Bloomberg Barclays U.S. Aggregate Bond Index gained 10.12% for the fiscal year. Early in the period, yields steadied through the end of 2019 and into early January. They then plunged in February, amid robust investor demand for most fixed-income assets – especially U.S. Treasury bonds – as the outbreak and spread of the coronavirus threatened to hamper global economic growth and corporate earnings, leading to pockets of market illiquidity in March. Market intervention by the Fed boosted liquidity and led to a broad rally for fixed-income assets from April through July, prompting many non-U.S. investors to return to U.S. markets. Within the Bloomberg Barclays index, corporate bonds rose 12.44% for the period, topping the 11.84% advance of U.S Treasuries. Conversely, agency mortgage-backed securities (+5.43%) and asset-backed securities (+5.13%) each lagged. Outside the index, U.S. corporate high-yield bonds gained 4.14%, while Treasury Inflation-Protected Securities (TIPS) rose 10.38%.
Comments from Co-Portfolio Managers Franco Castagliuolo and Sean Corcoran: For the fiscal year, the fund gained 4.71%, roughly in line, net of fees, with the 4.78% advance of the benchmark, the Bloomberg Barclays GNMA Index. In managing the fund, we attempted to exploit market inefficiencies and identify attractively valued securities in accordance with our longer-term strategy. In doing so, we added value by keeping the fund's duration longer than that of the benchmark, meaning the fund benefited more than the GNMA index as market interest rates declined the past year. We also added value through sector allocation. Specifically, our decision to increase the fund's exposure to government mortgage-backed to-be-announced (TBA) securities issued by Fannie Mae and Freddie Mac helped; the Fannie and Freddie securities outperformed GNMAs through period end. In doing so, we increased the cash stake, in case we decide to take delivery on these TBA positions. The cash position also contributed slightly to the fund's relative result. Elsewhere, our use of swaptions to manage the fund's exposure to interest-rate volatility modestly benefited performance versus the benchmark. In contrast, our decision to overweight pools of mortgages with specified pay-ups nicked the relative return.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Investment Summary (Unaudited)
Coupon Distribution as of July 31, 2020
| | % of fund's investments |
| 0.01 - 0.99% | 7.0 |
| 1 - 1.99% | 0.0 |
| 2 - 2.99% | 9.3 |
| 3 - 3.99% | 37.4 |
| 4 - 4.99% | 18.3 |
| 5 - 5.99% | 5.4 |
| 6 - 6.99% | 1.2 |
| 7 - 7.99% | 0.7 |
| 8% and above | 1.3 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments.
Asset Allocation (% of fund's net assets)
| As of July 31, 2020*,**,*** |
| | Mortgage Securities | 70.3% |
| | CMOs and Other Mortgage Related Securities | 20.1% |
| | Short-Term Investments and Net Other Assets (Liabilities) | 9.6% |
* GNMA Securities - 63.9%
** Futures and Swaps - 24.1%
*** Written options - (10.9)%
Percentages in the above tables are adjusted for the effect of TBA Sale Commitments.
Percentages shown as 0.0% may reflect amounts less than 0.05%.
Schedule of Investments July 31, 2020
Showing Percentage of Net Assets
| U.S. Government Agency - Mortgage Securities - 76.6% | | | |
| | | Principal Amount (000s) | Value (000s) |
| Fannie Mae - 4.2% | | | |
| 12 month U.S. LIBOR + 1.480% 3.375% 7/1/34 (a)(b) | | 18 | 19 |
| 12 month U.S. LIBOR + 1.490% 3.34% 1/1/35 (a)(b) | | 102 | 106 |
| 12 month U.S. LIBOR + 1.530% 3.535% 3/1/36 (a)(b) | | 46 | 48 |
| 12 month U.S. LIBOR + 1.630% 3.568% 3/1/33 (a)(b) | | 65 | 67 |
| 12 month U.S. LIBOR + 1.640% 3.722% 6/1/47 (a)(b) | | 93 | 99 |
| 12 month U.S. LIBOR + 1.660% 3.892% 5/1/35 (a)(b) | | 157 | 163 |
| 12 month U.S. LIBOR + 1.670% 3.534% 11/1/36 (a)(b) | | 94 | 98 |
| 12 month U.S. LIBOR + 1.710% 4.164% 8/1/35 (a)(b) | | 179 | 187 |
| 12 month U.S. LIBOR + 1.890% 3.416% 8/1/35 (a)(b) | | 95 | 100 |
| 6 month U.S. LIBOR + 1.510% 2.756% 2/1/33 (a)(b) | | 20 | 20 |
| 6 month U.S. LIBOR + 1.530% 3.41% 12/1/34 (a)(b) | | 22 | 23 |
| 6 month U.S. LIBOR + 1.530% 3.41% 3/1/35 (a)(b) | | 27 | 28 |
| 6 month U.S. LIBOR + 1.550% 3.317% 10/1/33 (a)(b) | | 9 | 10 |
| 6 month U.S. LIBOR + 1.550% 3.375% 9/1/33 (a)(b) | | 244 | 253 |
| 6 month U.S. LIBOR + 1.560% 3.26% 7/1/35 (a)(b) | | 15 | 16 |
| U.S. TREASURY 1 YEAR INDEX + 2.190% 3.847% 7/1/36 (a)(b) | | 62 | 65 |
| U.S. TREASURY 1 YEAR INDEX + 2.290% 4.261% 10/1/33 (a)(b) | | 29 | 30 |
| U.S. TREASURY 1 YEAR INDEX + 2.460% 3.954% 7/1/34 (a)(b) | | 397 | 416 |
| U.S. TREASURY 1 YEAR INDEX + 2.460% 3.979% 9/1/34 (a)(b) | | 240 | 252 |
| 3% 2/1/33 to 7/1/50 | | 110,166 | 117,588 |
| 3.5% 9/1/34 to 4/1/50 (c) | | 55,464 | 59,525 |
| 3.525% 7/1/42 | | 97 | 106 |
| 8.5% 12/1/27 | | 25 | 29 |
| 9.5% 9/1/30 | | 10 | 11 |
| | | | 179,259 |
| Freddie Mac - 2.5% | | | |
| 12 month U.S. LIBOR + 1.510% 3.39% 11/1/35 (a)(b) | | 57 | 60 |
| 12 month U.S. LIBOR + 1.600% 2.6% 7/1/35 (a)(b) | | 49 | 51 |
| 12 month U.S. LIBOR + 1.860% 3.614% 4/1/36 (a)(b) | | 58 | 62 |
| 12 month U.S. LIBOR + 1.860% 4.241% 8/1/34 (a)(b) | | 83 | 87 |
| 12 month U.S. LIBOR + 1.960% 2.85% 6/1/33 (a)(b) | | 346 | 364 |
| 12 month U.S. LIBOR + 2.050% 4.198% 3/1/33 (a)(b) | | 2 | 2 |
| 6 month U.S. LIBOR + 1.580% 2.705% 12/1/35 (a)(b) | | 8 | 8 |
| 6 month U.S. LIBOR + 1.840% 3.526% 10/1/36 (a)(b) | | 235 | 246 |
| 6 month U.S. LIBOR + 1.860% 3.505% 10/1/35 (a)(b) | | 133 | 139 |
| U.S. TREASURY 1 YEAR INDEX + 2.030% 3.164% 6/1/33 (a)(b) | | 182 | 191 |
| U.S. TREASURY 1 YEAR INDEX + 2.220% 4.049% 12/1/35 (a)(b) | | 932 | 978 |
| U.S. TREASURY 1 YEAR INDEX + 2.260% 3.052% 6/1/33 (a)(b) | | 280 | 293 |
| U.S. TREASURY 1 YEAR INDEX + 2.410% 3.877% 3/1/35 (a)(b) | | 689 | 720 |
| 2.5% 7/1/50 | | 14,956 | 15,904 |
| 3% 4/1/34 to 6/1/50 | | 41,714 | 44,596 |
| 3.5% 4/1/50 | | 41,398 | 43,806 |
| | | | 107,507 |
| Ginnie Mae - 63.9% | | | |
| 3% 5/15/27 to 7/20/50 | | 440,321 | 472,270 |
| 3.7% 10/15/42 | | 7,525 | 8,164 |
| 4% 5/15/44 | | 2,181 | 2,397 |
| 4.5% 7/15/33 to 4/20/47 | | 128,813 | 145,081 |
| 4.75% 7/15/40 | | 867 | 979 |
| 4.875% 9/15/39 to 12/15/39 | | 5,464 | 6,232 |
| 5.09% 4/15/36 to 11/15/36 | | 4,731 | 5,432 |
| 5.15% 2/15/36 to 4/15/36 | | 463 | 532 |
| 5.2% 7/15/36 | | 60 | 69 |
| 5.25% 4/15/36 to 4/15/37 | | 443 | 508 |
| 5.39% 5/15/36 | | 175 | 202 |
| 5.45% 2/15/37 | | 694 | 810 |
| 5.5% 7/20/24 to 2/20/42 | | 7,138 | 8,294 |
| 5.6% 11/15/36 | | 213 | 251 |
| 5.65% 4/15/37 | | 98 | 116 |
| 5.85% 1/15/37 | | 107 | 128 |
| 6.45% 1/15/32 to 8/15/32 | | 199 | 232 |
| 6.5% 7/15/23 to 1/15/39 | | 5,993 | 6,961 |
| 7% to 7% 4/15/22 to 9/20/34 | | 11,643 | 13,364 |
| 7.25% 9/15/27 | | 32 | 36 |
| 7.5% to 7.5% 9/15/21 to 9/20/32 | | 4,527 | 5,153 |
| 8% 12/15/21 to 9/15/31 | | 1,161 | 1,314 |
| 8.5% 9/15/21 to 2/15/31 | | 136 | 161 |
| 9% to 9% 11/15/20 to 5/15/30 | | 19 | 20 |
| 2.25% 5/20/50 | | 3,862 | 4,093 |
| 2.375% 5/20/50 | | 1,783 | 1,906 |
| 2.5% 3/15/28 to 5/20/50 | | 75,793 | 80,414 |
| 2.5% 8/1/50 (d) | | 123,600 | 130,553 |
| 2.625% 5/20/50 | | 7,232 | 7,641 |
| 2.75% 5/20/50 | | 2,747 | 2,902 |
| 3% 8/1/50 (d) | | 15,850 | 16,760 |
| 3.25% 2/20/41 to 7/20/46 | | 2,011 | 2,105 |
| 3.375% 5/20/50 | | 1,060 | 1,116 |
| 3.5% to 3.5% 9/15/26 to 1/20/50 (e)(f)(g) | | 929,089 | 1,008,389 |
| 3.74% 7/20/42 to 8/20/42 | | 864 | 943 |
| 3.75% 10/20/41 to 7/20/47 | | 24,595 | 26,437 |
| 4% 2/20/33 to 1/20/50 | | 597,563 | 653,535 |
| 4.25% 1/20/46 | | 487 | 529 |
| 5% 6/20/29 to 7/20/48 | | 91,090 | 102,635 |
| 5.35% 4/20/29 to 12/20/30 | | 6,998 | 7,722 |
| 5.75% 9/20/39 to 9/20/40 | | 10,579 | 12,103 |
| 6% to 6% 12/15/23 to 3/15/39 | | 10,271 | 11,842 |
| 7.395% 6/20/25 to 2/20/27 | | 275 | 304 |
| | | | 2,750,635 |
| Uniform Mortgage Backed Securities - 6.0% | | | |
| 2% 8/1/50 (d) | | 44,300 | 45,895 |
| 2% 8/1/50 (d) | | 71,150 | 73,712 |
| 2% 8/1/50 (d) | | 8,050 | 8,340 |
| 2% 8/1/50 (d) | | 8,050 | 8,340 |
| 2.5% 8/1/50 (d) | | 30,300 | 31,834 |
| 3% 8/1/50 (d) | | 6,350 | 6,718 |
| 3% 8/1/50 (d) | | 3,650 | 3,862 |
| 3% 8/1/50 (d) | | 5,750 | 6,084 |
| 3% 8/1/50 (d) | | 100 | 106 |
| 3.5% 8/1/50 (d) | | 30,000 | 31,631 |
| 3.5% 8/1/50 (d) | | 30,000 | 31,631 |
| 3.5% 8/1/50 (d) | | 10,700 | 11,282 |
| | | | 259,435 |
| TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES | | | |
| (Cost $3,175,671) | | | 3,296,836 |
|
| Collateralized Mortgage Obligations - 20.1% | | | |
| U.S. Government Agency - 20.1% | | | |
| Fannie Mae: | | | |
| planned amortization class Series G93-32 Class PJ, 6.75% 9/25/23 | | $677 | $727 |
| Series 2016-3 Class IP, 4% 2/25/46 (h) | | 38,018 | 5,067 |
| Series 2016-78 Class IO, 3.5% 11/25/46 (h) | | 10,159 | 1,146 |
| Series 2017-74 Class SH, 6.200% - 1 month U.S. LIBOR 6.0284% 10/25/47 (a)(h)(i) | | 36,773 | 6,154 |
| Fannie Mae Stripped Mortgage-Backed Securities: | | | |
| Series 331 Class 12, 6.5% 2/25/33 (a)(h) | | 177 | 36 |
| Series 339 Class 5, 5.5% 7/25/33 (h) | | 226 | 41 |
| Series 343 Class 16, 5.5% 5/25/34 (h) | | 202 | 33 |
| Freddie Mac: | | | |
| planned amortization class: | | | |
| Series 2220 Class PD, 8% 3/15/30 | | 465 | 564 |
| Series 40 Class K, 6.5% 8/17/24 | | 72 | 78 |
| sequential payer Series 2204 Class N, 7.5% 12/20/29 | | 862 | 1,035 |
| Series 2018-4763 Class SC, 6.200% - 1 month U.S. LIBOR 6.0253% 8/15/47 (a)(h)(i) | | 21,209 | 2,580 |
| Ginnie Mae Series 2011-93 Class SA, 6.660% - 1 month U.S. LIBOR 6.4733% 7/20/41 (a)(h)(i) | | 13,016 | 3,068 |
| Ginnie Mae guaranteed REMIC pass-thru certificates: | | | |
| floater: | | | |
| Series 2007-37 Class TS, 6.690% - 1 month U.S. LIBOR 6.5134% 6/16/37 (a)(h)(i) | | 1,130 | 278 |
| Series 2008-51 Class FE, 1 month U.S. LIBOR + 0.750% 0.9266% 6/16/38 (a)(b) | | 261 | 265 |
| Series 2008-57 Class AF, 1 month U.S. LIBOR + 0.580% 0.7668% 7/20/38 (a)(b) | | 751 | 759 |
| Series 2010-130 Class KF, 1 month U.S. LIBOR + 0.650% 0.8266% 10/16/40 (a)(b) | | 1,533 | 1,557 |
| Series 2010-H03 Class FA, 1 month U.S. LIBOR + 0.550% 0.7336% 3/20/60 (a)(b)(j) | | 15,126 | 15,131 |
| Series 2010-H17 Class FA, 1 month U.S. LIBOR + 0.330% 0.5136% 7/20/60 (a)(b)(j) | | 9,853 | 9,797 |
| Series 2010-H18 Class AF, 1 month U.S. LIBOR + 0.300% 0.4781% 9/20/60 (a)(b)(j) | | 11,753 | 11,680 |
| Series 2010-H19 Class FG, 1 month U.S. LIBOR + 0.300% 0.4781% 8/20/60 (a)(b)(j) | | 12,223 | 12,150 |
| Series 2010-H27 Series FA, 1 month U.S. LIBOR + 0.380% 0.5581% 12/20/60 (a)(b)(j) | | 4,281 | 4,263 |
| Series 2011-H05 Class FA, 1 month U.S. LIBOR + 0.500% 0.6781% 12/20/60 (a)(b)(j) | | 5,911 | 5,906 |
| Series 2011-H07 Class FA, 1 month U.S. LIBOR + 0.500% 0.6781% 2/20/61 (a)(b)(j) | | 2,226 | 2,225 |
| Series 2011-H12 Class FA, 1 month U.S. LIBOR + 0.490% 0.6681% 2/20/61 (a)(b)(j) | | 12,745 | 12,735 |
| Series 2011-H13 Class FA, 1 month U.S. LIBOR + 0.500% 0.6781% 4/20/61 (a)(b)(j) | | 4,805 | 4,801 |
| Series 2011-H14: | | | |
| Class FB, 1 month U.S. LIBOR + 0.500% 0.6781% 5/20/61 (a)(b)(j) | | 6,395 | 6,390 |
| Class FC, 1 month U.S. LIBOR + 0.500% 0.6781% 5/20/61 (a)(b)(j) | | 5,546 | 5,542 |
| Series 2011-H17 Class FA, 1 month U.S. LIBOR + 0.530% 0.7081% 6/20/61 (a)(b)(j) | | 6,813 | 6,812 |
| Series 2011-H21 Class FA, 1 month U.S. LIBOR + 0.600% 0.7781% 10/20/61 (a)(b)(j) | | 7,762 | 7,774 |
| Series 2012-48 Class FA, 1 month U.S. LIBOR + 0.350% 0.5266% 4/16/42 (a)(b) | | 533 | 533 |
| Series 2012-76 Class GF 1 month U.S. LIBOR + 0.300% 0.4766% 6/16/42 (a)(b) | | 607 | 609 |
| Series 2012-H01 Class FA, 1 month U.S. LIBOR + 0.700% 0.8781% 11/20/61 (a)(b)(j) | | 7,461 | 7,490 |
| Series 2012-H03 Class FA, 1 month U.S. LIBOR + 0.700% 0.8781% 1/20/62 (a)(b)(j) | | 4,937 | 4,955 |
| Series 2012-H06 Class FA, 1 month U.S. LIBOR + 0.630% 0.8081% 1/20/62 (a)(b)(j) | | 7,078 | 7,094 |
| Series 2012-H07 Class FA, 1 month U.S. LIBOR + 0.630% 0.8081% 3/20/62 (a)(b)(j) | | 4,560 | 4,568 |
| Series 2012-H21 Class DF, 1 month U.S. LIBOR + 0.650% 0.8281% 5/20/61 (a)(b)(j) | | 110 | 111 |
| Series 2012-H26, Class CA, 1 month U.S. LIBOR + 0.530% 0.7081% 7/20/60 (a)(b)(j) | | 207 | 207 |
| Series 2015-H13 Class FL, 1 month U.S. LIBOR + 0.280% 0.4581% 5/20/63 (a)(b)(j) | | 159 | 159 |
| Series 2015-H19 Class FA, 1 month U.S. LIBOR + 0.200% 0.3781% 4/20/63 (a)(b)(j) | | 248 | 247 |
| Series 2016-12 Class FA, 1 month U.S. LIBOR + 0.350% 0.5368% 1/20/46 (a)(b) | | 2,050 | 2,047 |
| Series 2019-143 Class CF, 1 month U.S. LIBOR + 0.450% 0.6368% 11/20/49 (a)(b) | | 74,594 | 74,842 |
| Series 2019-42 Class FK, 1 month U.S. LIBOR + 0.450% 0.6368% 4/20/49 (a)(b) | | 11,790 | 11,845 |
| floater planned amortization class: | | | |
| Series 2020-18 Class GF, 1 month U.S. LIBOR + 0.450% 0.6368% 2/20/50 (a)(b) | | 24,946 | 25,006 |
| Series 2020-76 Class KF, 1 month U.S. LIBOR + 0.400% 0.5868% 5/20/50 (a)(b) | | 62,068 | 62,053 |
| planned amortization class: | | | |
| Series 2003-74 Class PZ, 5.5% 8/20/33 | | 4,428 | 5,060 |
| Series 2004-19 Class DP, 5.5% 3/20/34 | | 12 | 13 |
| Series 2005-24 Class TC, 5.5% 3/20/35 | | 3,451 | 3,873 |
| Series 2005-57 Class PB, 5.5% 7/20/35 | | 5,302 | 6,070 |
| Series 2006-50 Class JC, 5% 6/20/36 | | 1,612 | 1,733 |
| Series 2010-117 Class E, 3% 10/20/39 | | 5,113 | 5,219 |
| Series 2010-158 Class MS, 10.000% - 1 month U.S. LIBOR 9.6265% 12/20/40 (a)(i) | | 5,065 | 6,100 |
| Series 2010-160 Class MX, 4.5% 8/20/39 | | 3,559 | 3,649 |
| Series 2011-136 Class WI, 4.5% 5/20/40 (h) | | 1,077 | 62 |
| Series 2015-24 Class PI, 3.5% 2/20/45 (h) | | 17,262 | 2,514 |
| Series 2016-69 Class WA, 3% 2/20/46 | | 2,476 | 2,626 |
| Series 2017-134 Class BA, 2.5% 11/20/46 | | 856 | 897 |
| Series 2017-139 Class K, 3% 8/20/47 | | 40,294 | 42,292 |
| Series 2017-153 Class GA, 3% 9/20/47 | | 6,286 | 6,648 |
| Series 2017-182 Class KA, 3% 10/20/47 | | 5,893 | 6,220 |
| Series 2018-13 Class Q, 3% 4/20/47 | | 7,802 | 8,186 |
| sequential payer: | | | |
| Series 2002-42 Class ZA, 6% 6/20/32 | | 389 | 451 |
| Series 2003-75 Class ZA, 5.5% 9/20/33 | | 1,514 | 1,727 |
| Series 2004-24 Class ZM, 5% 4/20/34 | | 3,268 | 3,733 |
| Series 2004-46 Class BZ, 6% 6/20/34 | | 1,913 | 2,298 |
| Series 2004-86 Class G, 6% 10/20/34 | | 6,273 | 7,850 |
| Series 2005-26 Class ZA, 5.5% 1/20/35 | | 14,379 | 16,483 |
| Series 2005-28 Class AJ, 5.5% 4/20/35 | | 720 | 728 |
| Series 2005-47 Class ZY, 6% 6/20/35 | | 9,865 | 11,427 |
| Series 2005-6 Class EX, 5.5% 11/20/34 | | 1,001 | 1,230 |
| Series 2005-82 Class JV, 5% 6/20/35 | | 2,845 | 3,210 |
| Series 2006-2 Class Z, 5.5% 1/20/36 | | 6,420 | 7,370 |
| Series 2010-160 Class DY, 4% 12/20/40 | | 33,490 | 37,056 |
| Series 2010-168 Class BG, 4% 4/20/40 | | 8,855 | 9,949 |
| Series 2010-170 Class B, 4% 12/20/40 | | 5,295 | 5,860 |
| Series 2011-21 Class SB, 9.500% - 1 month U.S. LIBOR 9.1467% 2/16/41 (a)(i) | | 11,199 | 13,633 |
| Series 2011-29 Class BV, 5% 5/20/40 | | 10,483 | 10,975 |
| Series 2011-72 Class SE, 7.420% - 1 month U.S. LIBOR 7.1727% 5/16/41 (a)(i) | | 21,985 | 25,378 |
| Series 2016-H04 Class FE, 1 month U.S. LIBOR + 0.650% 0.8281% 11/20/65 (a)(b)(j) | | 202 | 202 |
| Series 2017-139 Class BA, 3% 9/20/47 | | 11,699 | 12,586 |
| Series 2018-H12 Class HA, 3.25% 8/20/68 (j) | | 22,147 | 24,075 |
| Series 2004-32: | | | |
| Class GS, 6.500% - 1 month U.S. LIBOR 6.3234% 5/16/34 (a)(h)(i) | | 350 | 75 |
| Class SG, 6.500% - 1 month U.S. LIBOR 6.3133% 3/20/33 (a)(h)(i) | | 5,169 | 993 |
| Series 2004-59 Class SC, 7.200% - 1 month U.S. LIBOR 7.0234% 8/16/34 (a)(h)(i) | | 1,994 | 518 |
| Series 2004-73 Class AL, 7.200% - 1 month U.S. LIBOR 7.0234% 8/17/34 (a)(h)(i) | | 640 | 163 |
| Series 2005-13 Class SA, 6.800% - 1 month U.S. LIBOR 6.6133% 2/20/35 (a)(h)(i) | | 3,693 | 845 |
| Series 2005-6 Class EY, 5.5% 11/20/33 | | 1,016 | 1,252 |
| Series 2005-82 Class NS, 6.300% - 1 month U.S. LIBOR 6.1133% 7/20/34 (a)(h)(i) | | 3,783 | 839 |
| Series 2006-13 Class DS, 11.100% - 1 month U.S. LIBOR 10.8199% 3/20/36 (a)(i) | | 3,789 | 4,943 |
| Series 2007-35 Class SC, 40.200% - 1 month U.S. LIBOR 39.1402% 6/16/37 (a)(i) | | 1,044 | 2,033 |
| Series 2009-13 Class E, 4.5% 3/16/39 | | 3,093 | 3,324 |
| Series 2009-42 Class AY, 5% 6/16/37 | | 2,155 | 2,421 |
| Series 2010-14 Class SN, 5.950% - 1 month U.S. LIBOR 5.7734% 2/16/40 (a)(h)(i) | | 2,649 | 503 |
| Series 2010-H10 Class FA, 1 month U.S. LIBOR + 0.330% 0.5136% 5/20/60 (a)(b)(j) | | 6,423 | 6,386 |
| Series 2011-52 Class HI, 7% 4/16/41 (h) | | 507 | 104 |
| Series 2011-54 Class SA, 6.000% - 1 month U.S. LIBOR 5.8133% 4/20/41 (a)(h)(i) | | 6,716 | 1,226 |
| Series 2012-103 Class IL, 3% 8/20/27 (h) | | 21,405 | 1,364 |
| Series 2012-64 Class KI, 3.5% 11/20/36 (h) | | 581 | 7 |
| Series 2012-75 Class SA, 6.050% - 1 month U.S. LIBOR 5.8633% 6/20/42 (a)(h)(i) | | 11,732 | 2,479 |
| Series 2012-76 Class GS, 6.700% - 1 month U.S. LIBOR 6.5234% 6/16/42 (a)(h)(i) | | 1,843 | 430 |
| Series 2013-124: | | | |
| Class ES, 8.667% - 1 month U.S. LIBOR 8.4177% 4/20/39 (a)(i) | | 831 | 866 |
| Class ST, 8.800% - 1 month U.S. LIBOR 8.551% 8/20/39 (a)(i) | | 3,315 | 3,415 |
| Series 2013-149 Class MA, 2.5% 5/20/40 | | 36,869 | 38,610 |
| Series 2013-182 Class IQ, 4.5% 12/16/43 (h) | | 6,021 | 1,008 |
| Series 2013-39 Class GS, 9.500% - 1 month U.S. LIBOR 9.1265% 3/20/41 (a)(i) | | 27,899 | 33,588 |
| Series 2014-133 Class IB, 5% 9/20/44 (h) | | 5,778 | 988 |
| Series 2014-146 Class EI, 5% 10/20/44 (h) | | 10,992 | 1,882 |
| Series 2014-154 Class IO, 5% 10/20/44 (h) | | 2,231 | 381 |
| Series 2014-158 Class ID, 5% 10/20/44 (h) | | 9,452 | 1,707 |
| Series 2014-178 Class IO, 5% 11/20/44 (h) | | 13,867 | 2,381 |
| Series 2014-2 Class BA, 3% 1/20/44 | | 6,745 | 7,295 |
| Series 2014-21 Class HA, 3% 2/20/44 | | 2,918 | 3,092 |
| Series 2014-25 Class HC, 3% 2/20/44 | | 4,563 | 4,995 |
| Series 2014-5 Class A, 3% 1/20/44 | | 4,106 | 4,417 |
| Series 2015-117 Class KI, 5% 8/20/45 (h) | | 13,682 | 2,359 |
| Series 2015-14 Class IO, 5% 10/20/44 (h) | | 15,384 | 2,653 |
| Series 2015-79 Class IC, 5% 5/20/45 (h) | | 7,299 | 1,268 |
| Series 2015-H21: | | | |
| Class HZ, 4.3314% 6/20/63 (a)(j) | | 6,052 | 6,254 |
| Class JZ, 4.237% 6/20/65 (a)(j) | | 1,248 | 1,312 |
| Series 2016-146 Class AL, 5.848% 5/20/40 (a) | | 3,786 | 4,466 |
| Series 2016-17 Class A, 3% 2/16/46 | | 24,501 | 26,543 |
| Series 2016-171 Class BI, 5% 10/20/44 (h) | | 13,407 | 2,292 |
| Series 2017-186 Class HK, 3% 11/16/45 | | 13,423 | 14,365 |
| Series 2017-75 Class PT, 5.7164% 4/20/47 (a) | | 17,329 | 20,438 |
| Series 2017-H06 Class FA, U.S. TREASURY 1 YEAR INDEX + 0.350% 0.52% 8/20/66 (a)(b)(j) | | 20,031 | 19,832 |
| | | | 864,055 |
| TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | | | |
| (Cost $839,519) | | | 864,055 |
|
| Commercial Mortgage Securities - 0.0% | | | |
| Ginnie Mae guaranteed Multi-family REMIC pass-thru securities: | | | |
| sequential payer Series 2001-58 Class X, 0.4902% 9/16/41 (a)(h) | | 797 | 0 |
| Series 2001-12 Class X, 0.643% 7/16/40 (a)(h) | | 117 | 0 |
| Ginnie Mae guaranteed REMIC pass-thru certificates: | | | |
| sequential payer Series 2002-81 Class IO, 0.8643% 9/16/42 (a)(h) | | 2,820 | 17 |
| Series 2002-62 Class IO, 1.0845% 8/16/42 (a)(h) | | 1,756 | 3 |
| TOTAL COMMERCIAL MORTGAGE SECURITIES | | | |
| (Cost $6,221) | | | 20 |
| | | Shares | Value (000s) |
|
| Money Market Funds - 15.4% | | | |
| Fidelity Cash Central Fund 0.14% (k) | | | |
| (Cost $663,919) | | 663,778,120 | 663,977 |
| Purchased Swaptions - 0.2% | | | | |
| | | Expiration Date | Notional Amount (000s) | Value (000s) |
| Put Options - 0.0% | | | | |
| Option on an interest rate swap with Bank of America N.A. to pay semi-annually a fixed rate of 1.7375% and receive quarterly a floating rate based on 3-month LIBOR, expiring September 2029 | | 9/20/24 | 50,700 | $404 |
| Option on an interest rate swap with Bank of America N.A. to pay semi-annually a fixed rate of 1.78% and receive quarterly a floating rate based on 3-month LIBOR, expiring October 2029 | | 10/15/24 | 50,900 | 399 |
| Option on an interest rate swap with JPMorgan Chase Bank, N.A. to pay semi-annually a fixed rate of 2.313% and receive quarterly a floating rate based on 3-month LIBOR, expiring June 2029 | | 6/6/24 | 19,900 | 70 |
|
| TOTAL PUT OPTIONS | | | | 873 |
|
| Call Options - 0.2% | | | | |
| Option on an interest rate swap with Bank of America N.A. to receive semi-annually a fixed rate of 1.7375% and pay quarterly a floating rate based on 3-month LIBOR, expiring September 2029 | | 9/20/24 | 50,700 | 2,965 |
| Option on an interest rate swap with Bank of America N.A. to receive semi-annually a fixed rate of 1.78% and pay quarterly a floating rate based on 3-month LIBOR, expiring October 2029 | | 10/15/24 | 50,900 | 3,059 |
| Option on an interest rate swap with JPMorgan Chase Bank, N.A. to receive semi-annually a fixed rate of 2.313% and pay quarterly a floating rate based on 3-month LIBOR, expiring June 2029 | | 6/6/24 | 19,900 | 1,676 |
|
| TOTAL CALL OPTIONS | | | | 7,700 |
|
| TOTAL PURCHASED SWAPTIONS | | | | |
| (Cost $6,940) | | | | 8,573 |
| TOTAL INVESTMENT IN SECURITIES - 112.3% | | | | |
| (Cost $4,692,270) | | | | 4,833,461 |
| NET OTHER ASSETS (LIABILITIES) - (12.3)% | | | | (530,593) |
| NET ASSETS - 100% | | | | $4,302,868 |
| TBA Sale Commitments | | |
| | Principal Amount (000s) | Value (000s) |
| Ginnie Mae | | |
| 3% 8/1/50 | $(1,600) | $(1,692) |
| 3% 8/1/50 | (26,500) | (28,021) |
|
| TOTAL GINNIE MAE | | (29,713) |
|
| Uniform Mortgage Backed Securities | | |
| 2.5% 8/1/50 | (3,500) | (3,677) |
| 3% 8/1/50 | (15,850) | (16,769) |
| 3% 8/1/50 | (111,200) | (117,650) |
| 3.5% 8/1/50 | (10,700) | (11,282) |
| 3.5% 8/1/50 | (60,000) | (63,263) |
| 3.5% 8/1/50 | (12,650) | (13,338) |
| 3.5% 8/1/50 | (11,550) | (12,178) |
|
| TOTAL UNIFORM MORTGAGE BACKED SECURITIES | | (238,157) |
|
| TOTAL TBA SALE COMMITMENTS | | |
| (Proceeds $267,641) | | $(267,870) |
| Written Swaptions | | | |
| | Expiration Date | Notional Amount | Value (000s) |
| Put Swaptions | | | |
| Option on an interest rate swap with Bank of America N.A. to pay semi-annually a fixed rate of 1.395% and receive quarterly a floating rate based on 3-month LIBOR, expiring February 2030 | 2/24/25 | 13,100 | $(179) |
| Option on an interest rate swap with Bank of America N.A. to pay semi-annually a fixed rate of 1.57% and receive quarterly a floating rate based on 3-month LIBOR, expiring February 2030 | 2/20/25 | 64,700 | (735) |
| Option on an interest rate swap with Bank of America N.A. to pay semi-annually a fixed rate of 1.775% and receive quarterly a floating rate based on 3-month LIBOR, expiring December 2029 | 12/3/24 | 1,500 | (13) |
| Option on an interest rate swap with Bank of America N.A. to pay semi-annually a fixed rate of 1.92% and receive quarterly a floating rate based on 3-month LIBOR, expiring January 2030 | 1/8/25 | 8,000 | (60) |
| Option on an interest rate swap with Bank of America N.A. to pay semi-annually a fixed rate of 1.97% and receive quarterly a floating rate based on 3-month LIBOR, expiring August 2029 | 8/1/24 | 11,000 | (63) |
| Option on an interest rate swap with Goldman Sachs Bank U.S.A. to pay semi-annually a fixed rate of 1.487% and receive quarterly a floating rate based on 3-month LIBOR, expiring October 2030 | 10/2/20 | 69,500 | (2) |
| Option on an interest rate swap with JPMorgan Chase Bank N.A. to pay semi-annually a fixed rate of 1.684% and receive quarterly a floating rate based on 3-month LIBOR, expiring January 2030 | 1/27/25 | 58,000 | (570) |
|
| TOTAL PUT SWAPTIONS | | | (1,622) |
|
| Call Swaptions | | | |
| Option on an interest rate swap with Bank of America N.A. to receive semi-annually a fixed rate of 1.395% and pay quarterly a floating rate based on 3-month LIBOR, expiring February 2030 | 2/24/25 | 13,100 | (589) |
| Option on an interest rate swap with Bank of America N.A. to receive semi-annually a fixed rate of 1.57% and pay quarterly a floating rate based on 3-month LIBOR, expiring February 2030 | 2/20/25 | 64,700 | (3,323) |
| Option on an interest rate swap with Bank of America N.A. to receive semi-annually a fixed rate of 1.775% and pay quarterly a floating rate based on 3-month LIBOR, expiring December 2029 | 12/3/24 | 1,500 | (89) |
| Option on an interest rate swap with Bank of America N.A. to receive semi-annually a fixed rate of 1.92% and pay quarterly a floating rate based on 3-month LIBOR, expiring January 2030 | 1/8/25 | 8,000 | (523) |
| Option on an interest rate swap with Bank of America N.A. to receive semi-annually a fixed rate of 1.97% and pay quarterly a floating rate based on 3-month LIBOR, expiring August 2029 | 8/1/24 | 11,000 | (754) |
| Option on an interest rate swap with Goldman Sachs Bank U.S.A. to receive semi-annually a fixed rate of 1.487% and pay quarterly a floating rate based on 3-month LIBOR, expiring October 2030 | 10/2/20 | 69,500 | (6,524) |
| Option on an interest rate swap with JPMorgan Chase Bank N.A. to receive semi-annually a fixed rate of 1.684% and pay quarterly a floating rate based on 3-month LIBOR, expiring January 2030 | 1/27/25 | 58,000 | (3,240) |
|
| TOTAL CALL SWAPTIONS | | | (15,042) |
|
| TOTAL WRITTEN SWAPTIONS | | | $(16,664) |
For the period, the average monthly notional amount at value for written swaptions in the aggregate was $469,400,000.
| Futures Contracts | | | | | |
| | Number of contracts | Expiration Date | Notional Amount (000s) | Value (000s) | Unrealized Appreciation/(Depreciation) (000s) |
| Purchased | | | | | |
| Treasury Contracts | | | | | |
| CBOT 2-Year U.S. Treasury Note Contracts (United States) | 174 | Sept. 2020 | $38,451 | $23 | $23 |
| Sold | | | | | |
| Treasury Contracts | | | | | |
| CBOT 10-Year U.S. Treasury Note Contracts (United States) | 4,797 | Sept. 2020 | 671,955 | (5,591) | (5,591) |
| CBOT 5-Year U.S. Treasury Note Contracts (United States) | 1,670 | Sept. 2020 | 210,629 | (1,112) | (1,112) |
| CBOT Long Term U.S. Treasury Bond Contracts (United States) | 139 | Sept. 2020 | 25,337 | (49) | (49) |
|
| Total Sold | | | | | (6,752) |
|
| TOTAL FUTURES CONTRACTS | | | | | $(6,729) |
The notional amount of futures purchased as a percentage of Net Assets is 0.9%
The notional amount of futures sold as a percentage of Net Assets is 21.1%
For the period, the average monthly notional amount at value for futures contracts in the aggregate was $746,770,000.
Swaps
| Payment Received | Payment Frequency | Payment Paid | Payment Frequency | Clearinghouse / Counterparty(1) | Maturity Date | Notional Amount (000s) | Value (000s) | Upfront Premium Received/(Paid) (000s)(2) | Unrealized Appreciation/(Depreciation) (000s) |
| Interest Rate Swaps | | | | | | | | | |
| 0.5% | Semi - annual | 3-month LIBOR(3) | Quarterly | LCH | Sep. 2022 | $62,178 | $99 | $0 | $99 |
| 0.5% | Semi - annual | 3-month LIBOR(3) | Quarterly | LCH | Sep. 2025 | 49,846 | 2,064 | 0 | 2,064 |
| 0.75% | Semi - annual | 3-month LIBOR(3) | Quarterly | LCH | Sep. 2027 | 3,805 | 39 | 0 | 39 |
| 0.75% | Semi - annual | 3-month LIBOR(3) | Quarterly | LCH | Sep. 2030 | 47,378 | 716 | 0 | 716 |
| 3-month LIBOR(3) | Quarterly | 0.75% | Semi - annual | LCH | Sep. 2050 | 67 | (4) | 0 | (4) |
|
| TOTAL INTEREST RATE SWAPS | | | | | | | $2,914 | $0 | $2,914 |
|
(1) Swaps with LCH Clearnet Group (LCH) are centrally cleared over-the-counter (OTC) swaps.
(2) Any premiums for centrally cleared over-the-counter (OTC) swaps are recorded periodically throughout the term of the swap to variation margin and included in unrealized appreciation (depreciation).
(3) Represents floating rate.
Values shown as $0 in the Schedule of Investments may reflect amounts less than $500.
Legend
(a) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end.
(b) Coupon is indexed to a floating interest rate which may be multiplied by a specified factor and/or subject to caps or floors.
(c) Security or a portion of the security has been segregated as collateral for open options. At period end, the value of securities pledged amounted to $2,913,000.
(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis.
(e) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At period end, the value of securities pledged amounted to $10,818,000.
(f) Security or a portion of the security was pledged to cover margin requirements for centrally cleared OTC swaps. At period end, the value of securities pledged amounted to $4,674,000.
(g) Security or a portion of the security has been segregated as collateral for mortgage-backed or asset-backed securities purchased on a delayed delivery or when-issued basis. At period end, the value of securities pledged amounted to $311,000.
(h) Security represents right to receive monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool as of the end of the period.
(i) Coupon is inversely indexed to a floating interest rate multiplied by a specified factor. The price may be considerably more volatile than the price of a comparable fixed rate security.
(j) Represents an investment in an underlying pool of reverse mortgages which typically do not require regular principal and interest payments as repayment is deferred until a maturity event.
(k) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| | (Amounts in thousands) |
| Fidelity Cash Central Fund | $1,901 |
| Total | $1,901 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable.
The value, beginning of period, for the Fidelity Cash Central Fund was $136,452,000. Net realized gain (loss) and change in net unrealized appreciation (depreciation) on Fidelity Cash Central Fund is presented in the Statement of Operations, if applicable. Purchases and sales of the Fidelity Cash Central Fund were $2,419,999,000 and $1,892,502,000, respectively, during the period.
Investment Valuation
The following is a summary of the inputs used, as of July 31, 2020, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| (Amounts in thousands) | | | | |
| Investments in Securities: | | | | |
| U.S. Government Agency - Mortgage Securities | $3,296,836 | $-- | $3,296,836 | $-- |
| Collateralized Mortgage Obligations | 864,055 | -- | 864,055 | -- |
| Commercial Mortgage Securities | 20 | -- | 20 | -- |
| Money Market Funds | 663,977 | 663,977 | -- | -- |
| Purchased Swaptions | 8,573 | -- | 8,573 | -- |
| Total Investments in Securities: | $4,833,461 | $663,977 | $4,169,484 | $-- |
| Derivative Instruments: | | | | |
| Assets | | | | |
| Futures Contracts | $23 | $23 | $-- | $-- |
| Swaps | 2,918 | -- | 2,918 | -- |
| Total Assets | $2,941 | $23 | $2,918 | $-- |
| Liabilities | | | | |
| Futures Contracts | $(6,752) | $(6,752) | $-- | $-- |
| Swaps | (4) | -- | (4) | -- |
| Written Swaptions | (16,664) | -- | (16,664) | -- |
| Total Liabilities | $(23,420) | $(6,752) | $(16,668) | $-- |
| Total Derivative Instruments: | $(20,479) | $(6,729) | $(13,750) | $-- |
| Other Financial Instruments: | | | | |
| TBA Sale Commitments | $(267,870) | $-- | $(267,870) | $-- |
| Total Other Financial Instruments: | $(267,870) | $-- | $(267,870) | $-- |
Value of Derivative Instruments
The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of July 31, 2020. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Financial Statements.
| Primary Risk Exposure / Derivative Type | Value |
| | Asset | Liability |
| (Amounts in thousands) | | |
| Interest Rate Risk | | |
| Futures Contracts(a) | $23 | $(6,752) |
| Purchased Swaptions(b) | 8,573 | 0 |
| Swaps(c) | 2,918 | (4) |
| Written Swaptions(d) | 0 | (16,664) |
| Total Interest Rate Risk | 11,514 | (23,420) |
| Total Value of Derivatives | $11,514 | $(23,420) |
(a) Reflects gross cumulative appreciation (depreciation) on futures contracts as presented in the Schedule of Investments. In the Statement of Assets and Liabilities, the period end daily variation margin is included in receivable or payable for daily variation margin on futures contracts, and the net cumulative appreciation (depreciation) is included in Total accumulated earnings (loss).
(b) Gross value is included in the Statement of Assets and Liabilities in the investments, at value line-item.
(c) For centrally cleared over-the-counter (OTC) swaps, reflects gross cumulative appreciation (depreciation) as presented in the Schedule of Investments. In the Statement of Assets and Liabilities, the period end daily variation margin for centrally cleared OTC swaps is included in receivable or payable for daily variation margin on centrally cleared OTC swaps, and the net cumulative appreciation (depreciation) for centrally cleared OTC swaps is included in Total accumulated earnings (loss).
(d) Gross value is presented in the Statement of Assets and Liabilities in the written options, at value line-item.
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| Amounts in thousands (except per-share amount) | | July 31, 2020 |
| Assets | | |
Investment in securities, at value — See accompanying schedule:
Unaffiliated issuers (cost $4,028,351) | $4,169,484 | |
| Fidelity Central Funds (cost $663,919) | 663,977 | |
| Total Investment in Securities (cost $4,692,270) | | $4,833,461 |
| Receivable for investments sold | | 52 |
| Receivable for premium on written options | | 12,623 |
| Receivable for TBA sale commitments | | 267,641 |
| Receivable for fund shares sold | | 3,041 |
| Interest receivable | | 10,107 |
| Distributions receivable from Fidelity Central Funds | | 83 |
| Receivable for daily variation margin on centrally cleared OTC swaps | | 81 |
| Other receivables | | 47 |
| Total assets | | 5,127,136 |
| Liabilities | | |
| Payable for investments purchased | | |
| Regular delivery | $129,167 | |
| Delayed delivery | 405,271 | |
| TBA sale commitments, at value | 267,870 | |
| Payable for fund shares redeemed | 2,696 | |
| Distributions payable | 533 | |
| Accrued management fee | 1,072 | |
| Payable for daily variation margin on futures contracts | 409 | |
| Written options, at value (premium receivable $12,623) | 16,664 | |
| Other affiliated payables | 534 | |
| Other payables and accrued expenses | 52 | |
| Total liabilities | | 824,268 |
| Net Assets | | $4,302,868 |
| Net Assets consist of: | | |
| Paid in capital | | $4,216,162 |
| Total accumulated earnings (loss) | | 86,706 |
| Net Assets | | $4,302,868 |
| Net Asset Value, offering price and redemption price per share ($4,302,868 ÷ 364,743 shares) | | $11.80 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| Amounts in thousands | | Year ended July 31, 2020 |
| Investment Income | | |
| Interest | | 100,272 |
| Income from Fidelity Central Funds | | 1,901 |
| Total income | | 102,173 |
| Expenses | | |
| Management fee | $12,759 | |
| Transfer agent fees | 4,230 | |
| Fund wide operations fee | 2,032 | |
| Independent trustees' fees and expenses | 15 | |
| Commitment fees | 11 | |
| Total expenses before reductions | 19,047 | |
| Expense reductions | (3) | |
| Total expenses after reductions | | 19,044 |
| Net investment income (loss) | | 83,129 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 68,309 | |
| Fidelity Central Funds | (29) | |
| Futures contracts | (42,619) | |
| Swaps | (1,761) | |
| Written options | (3,783) | |
| Total net realized gain (loss) | | 20,117 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 91,414 | |
| Fidelity Central Funds | 57 | |
| Futures contracts | (2,319) | |
| Swaps | 2,110 | |
| Written options | (2,869) | |
| Delayed delivery commitments | 263 | |
| Total change in net unrealized appreciation (depreciation) | | 88,656 |
| Net gain (loss) | | 108,773 |
| Net increase (decrease) in net assets resulting from operations | | $191,902 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| Amounts in thousands | Year ended July 31, 2020 | Year ended July 31, 2019 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $83,129 | $106,920 |
| Net realized gain (loss) | 20,117 | (23,373) |
| Change in net unrealized appreciation (depreciation) | 88,656 | 155,703 |
| Net increase (decrease) in net assets resulting from operations | 191,902 | 239,250 |
| Distributions to shareholders | (89,664) | (99,743) |
| Share transactions | | |
| Proceeds from sales of shares | 1,123,989 | 467,925 |
| Reinvestment of distributions | 80,217 | 89,165 |
| Cost of shares redeemed | (1,175,971) | (845,030) |
| Net increase (decrease) in net assets resulting from share transactions | 28,235 | (287,940) |
| Total increase (decrease) in net assets | 130,473 | (148,433) |
| Net Assets | | |
| Beginning of period | 4,172,395 | 4,320,828 |
| End of period | $4,302,868 | $4,172,395 |
| Other Information | | |
| Shares | | |
| Sold | 96,351 | 41,399 |
| Issued in reinvestment of distributions | 6,888 | 7,913 |
| Redeemed | (100,992) | (75,482) |
| Net increase (decrease) | 2,247 | (26,170) |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
Fidelity GNMA Fund
| | | | | | |
| Years ended July 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | |
| Net asset value, beginning of period | $11.51 | $11.12 | $11.45 | $11.70 | $11.63 |
| Income from Investment Operations | | | | | |
| Net investment income (loss)A | .229 | .292 | .257 | .235 | .245 |
| Net realized and unrealized gain (loss) | .307 | .371 | (.337) | (.215) | .128 |
| Total from investment operations | .536 | .663 | (.080) | .020 | .373 |
| Distributions from net investment income | (.246) | (.273) | (.250) | (.224) | (.244) |
| Distributions from net realized gain | – | – | – | (.041) | (.059) |
| Distributions from tax return of capital | – | – | – | (.005) | – |
| Total distributions | (.246) | (.273) | (.250) | (.270) | (.303) |
| Net asset value, end of period | $11.80 | $11.51 | $11.12 | $11.45 | $11.70 |
| Total ReturnB | 4.71% | 6.04% | (.71)% | .19% | 3.26% |
| Ratios to Average Net AssetsC,D | | | | | |
| Expenses before reductions | .45% | .45% | .45% | .45% | .45% |
| Expenses net of fee waivers, if any | .45% | .45% | .45% | .45% | .45% |
| Expenses net of all reductions | .45% | .45% | .45% | .45% | .45% |
| Net investment income (loss) | 1.96% | 2.60% | 2.28% | 2.04% | 2.11% |
| Supplemental Data | | | | | |
| Net assets, end of period (in millions) | $4,303 | $4,172 | $4,321 | $5,216 | $6,375 |
| Portfolio turnover rateE | 561% | 420% | 252% | 270% | 304% |
A Calculated based on average shares outstanding during the period.
B Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
C Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
D Expense ratios reflect operating expenses of the Fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the Fund during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the Fund.
E Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements
For the period ended July 31, 2020
(Amounts in thousands except percentages)
1. Organization.
Fidelity GNMA Fund (the Fund) is a fund of Fidelity Income Fund (the Trust) and is authorized to issue an unlimited number of shares. Share transactions on the Statement of Changes in Net Assets may contain exchanges between affiliated funds. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Effective January 1, 2020:
Investment advisers Fidelity Investments Money Management, Inc., FMR Co., Inc., and Fidelity SelectCo, LLC, merged with and into Fidelity Management & Research Company. In connection with the merger transactions, the resulting, merged investment adviser was then redomiciled from Massachusetts to Delaware, changed its corporate structure from a corporation to a limited liability company, and changed its name to "Fidelity Management & Research Company LLC".
Fidelity Investments Institutional Operations Company, Inc. converted from a Massachusetts corporation to a Massachusetts LLC, and changed its name to "Fidelity Investments Institutional Operations Company LLC".
2. Investments in Fidelity Central Funds.
The Fund invests in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
The Money Market Central Funds seek preservation of capital and current income and are managed by the investment adviser. Annualized expenses of the Money Market Central Funds as of their most recent shareholder report date ranged from less than .005% to .01%.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. Collateralized mortgage obligations, commercial mortgage securities and U.S. government agency mortgage securities are valued by pricing vendors who utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. Swaps are marked-to-market daily based on valuations from third party pricing vendors, registered derivatives clearing organizations (clearinghouses) or broker-supplied valuations. These pricing sources may utilize inputs such as interest rate curves, credit spread curves, default possibilities and recovery rates. When independent prices are unavailable or unreliable, debt securities and swaps may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities and swaps are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy. Options traded over-the-counter are valued using vendor or broker-supplied valuations and are categorized as Level 2 in the hierarchy. Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of July 31, 2020 is included at the end of the Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Interest income is accrued as earned and includes coupon interest and amortization of premium and accretion of discount on debt securities as applicable.
Expenses. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan) for the Fund, certain independent Trustees have elected to defer receipt of a portion of their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees of $46 are included in the accompanying Statement of Assets and Liabilities in other receivables and other payables and accrued expenses, respectively.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. As of July 31, 2020, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Distributions are declared and recorded daily and paid monthly from net investment income. Distributions from realized gains, if any, are declared and recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to futures contracts, swaps, market discount, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $156,145 |
| Gross unrealized depreciation | (32,470) |
| Net unrealized appreciation (depreciation) | $123,675 |
| Tax Cost | $4,695,808 |
The tax-based components of distributable earnings as of period end were as follows:
| Capital loss carryforward | $(36,160) |
| Net unrealized appreciation (depreciation) on securities and other investments | $123,674 |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of fiscal period end and is subject to adjustment.
| No expiration | |
| Long-term | $(36,160) |
The tax character of distributions paid was as follows:
| | July 31, 2020 | July 31, 2019 |
| Ordinary Income | $89,664 | $ 99,743 |
Delayed Delivery Transactions and When-Issued Securities. During the period, the Fund transacted in securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The securities purchased on a delayed delivery or when-issued basis are identified as such in the Fund's Schedule of Investments. The Fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
To-Be-Announced (TBA) Securities and Mortgage Dollar Rolls. During the period, the Fund transacted in TBA securities that involved buying or selling mortgage-backed securities (MBS) on a forward commitment basis. A TBA transaction typically does not designate the actual security to be delivered and only includes an approximate principal amount; however delivered securities must meet specified terms defined by industry guidelines, including issuer, rate and current principal amount outstanding on underlying mortgage pools. The Fund may enter into a TBA transaction with the intent to take possession of or deliver the underlying MBS, or the Fund may elect to extend the settlement by entering into either a mortgage or reverse mortgage dollar roll. Mortgage dollar rolls are transactions where a fund sells TBA securities and simultaneously agrees to repurchase MBS on a later date at a lower price and with the same counterparty. Reverse mortgage dollar rolls involve the purchase and simultaneous agreement to sell TBA securities on a later date at a lower price. Transactions in mortgage dollar rolls and reverse mortgage dollar rolls are accounted for as purchases and sales and may result in an increase to the Fund's portfolio turnover rate.
Purchases and sales of TBA securities involve risks similar to those discussed above for delayed delivery and when-issued securities. Also, if the counterparty in a mortgage dollar roll or a reverse mortgage dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. Additionally, when a fund sells TBA securities without already owning or having the right to obtain the deliverable securities (an uncovered forward commitment to sell), it incurs a risk of loss because it could have to purchase the securities at a price that is higher than the price at which it sold them. A fund may be unable to purchase the deliverable securities if the corresponding market is illiquid.
TBA securities subject to a forward commitment to sell at period end are included at the end of the Fund's Schedule of Investments under the caption "TBA Sale Commitments." The proceeds and value of these commitments are reflected in the Fund's Statement of Assets and Liabilities as Receivable for TBA sale commitments and TBA sale commitments, at value, respectively.
4. Derivative Instruments.
Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including futures contracts, options and swaps. Derivatives are investments whose value is primarily derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified asset based on specified terms, to exchange future cash flows at periodic intervals based on a notional principal amount, or for one party to make one or more payments upon the occurrence of specified events in exchange for periodic payments from the other party.
The Fund used derivatives to increase returns, to gain exposure to certain types of assets and to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.
The Fund's use of derivatives increased or decreased its exposure to the following risk:
| Interest Rate Risk | Interest rate risk relates to the fluctuations in the value of interest-bearing securities due to changes in the prevailing levels of market interest rates. |
The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund. Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain OTC derivatives such as options, the Fund attempts to reduce its exposure to counterparty credit risk by entering into an International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement with each of its counterparties. The ISDA Master Agreement gives the Fund the right to terminate all transactions traded under such agreement upon the deterioration in the credit quality of the counterparty beyond specified levels. The ISDA Master Agreement gives each party the right, upon an event of default by the other party or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net payable by one party to the other. To mitigate counterparty credit risk on bi-lateral OTC derivatives, the Fund receives collateral in the form of cash or securities once the Fund's net unrealized appreciation on outstanding derivative contracts under an ISDA Master Agreement exceeds certain applicable thresholds, subject to certain minimum transfer provisions. The collateral received is held in segregated accounts with the Fund's custodian bank in accordance with the collateral agreements entered into between the Fund, the counterparty and the Fund's custodian bank. The Fund could experience delays and costs in gaining access to the collateral even though it is held by the Fund's custodian bank. The Fund's maximum risk of loss from counterparty credit risk related to bi-lateral OTC derivatives is generally the aggregate unrealized appreciation and unpaid counterparty payments in excess of any collateral pledged by the counterparty to the Fund. For OTC written options with upfront premiums received, the Fund is obligated to perform and therefore does not have counterparty risk. For OTC written options with premiums to be received at a future date, the maximum risk of loss from counterparty credit risk is the amount of the premium in excess of any collateral pledged by the counterparty. The Fund may be required to pledge collateral for the benefit of the counterparties on bi-lateral OTC derivatives in an amount not less than each counterparty's unrealized appreciation on outstanding derivative contracts, subject to certain minimum transfer provisions, and any such pledged collateral is identified in the Schedule of Investments. Exchange-traded futures contracts are not covered by the ISDA Master Agreement; however counterparty credit risk related to exchange-traded futures contracts may be mitigated by the protection provided by the exchange on which they trade. Counterparty credit risk related to centrally cleared OTC swaps may be mitigated by the protection provided by the clearinghouse.
Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, may involve risk of loss in excess of any initial investment and collateral received and amounts recognized in the Statement of Assets and Liabilities. In addition, there may be the risk that the change in value of the derivative contract does not correspond to the change in value of the underlying instrument.
Net Realized Gain (Loss) and Change in Net Unrealized Appreciation (Depreciation) on Derivatives. The table below, which reflects the impacts of derivatives on the financial performance of the Fund, summarizes the net realized gain (loss) and change in net unrealized appreciation (depreciation) for derivatives during the period as presented in the Statement of Operations.
| Primary Risk Exposure / Derivative Type | Net Realized Gain (Loss) | Change in Net Unrealized Appreciation (Depreciation) |
| Interest Rate Risk | | |
| Futures Contracts | $(42,619) | $(2,319) |
| Purchased Options | 4,662 | 1,232 |
| Swaps | (1,761) | 2,110 |
| Written Options | (3,783) | (2,869) |
| Totals | $(43,501) | $(1,846) |
A summary of the value of derivatives by primary risk exposure as of period end is included at the end of the Schedule of Investments.
Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the bond market and fluctuations in interest rates.
Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent daily payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable, if any, is included in daily variation margin on futures contracts in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract. The net realized gain (loss) and change in net unrealized appreciation (depreciation) on futures contracts during the period is presented in the Statement of Operations.
Any open futures contracts at period end are presented in the Schedule of Investments under the caption "Futures Contracts". The notional amount at value reflects each contract's exposure to the underlying instrument or index at period end. Securities deposited to meet initial margin requirements are identified in the Schedule of Investments.
Options. Options give the purchaser the right, but not the obligation, to buy (call) or sell (put) an underlying security or financial instrument at an agreed exercise or strike price between or on certain dates. Options obligate the seller (writer) to buy (put) or sell (call) an underlying instrument at the exercise or strike price or cash settle an underlying derivative instrument if the holder exercises the option on or before the expiration date. The Fund uses OTC options, such as swaptions, which are options where the underlying instrument is a swap, to manage its exposure to fluctuations in interest rates.
Upon entering into an options contract, a fund will pay or receive a premium. Premiums paid on purchased options are reflected as cost of investments and premiums received on written options are reflected as a liability on the Statement of Assets and Liabilities. Certain options may be purchased or written with premiums to be paid or received on a future date. Options are valued daily and any unrealized appreciation (depreciation) is reflected on the Statement of Assets and Liabilities. When an option is exercised, the cost or proceeds of the underlying instrument purchased or sold is adjusted by the amount of the premium. When an option is closed the Fund will realize a gain or loss depending on whether the proceeds or amount paid for the closing sale transaction is greater or less than the premium received or paid. When an option expires, gains and losses are realized to the extent of premiums received and paid, respectively. The net realized and unrealized gains (losses) on purchased options are included in the Statement of Operations in net realized gain (loss) and change in net unrealized appreciation (depreciation) on investment securities. The net realized gain (loss) and change in net unrealized appreciation (depreciation) on written options are presented in the Statement of Operations.
Any open options at period end are presented in the Schedule of Investments under the captions "Purchased Options," "Purchased Swaptions," "Written Options" and "Written Swaptions," as applicable.
Writing puts and buying calls tend to increase exposure to the underlying instrument while buying puts and writing calls tend to decrease exposure to the underlying instrument. For purchased options, risk of loss is limited to the premium paid, and for written options, risk of loss is the change in value in excess of the premium received.
Swaps. A swap is a contract between two parties to exchange future cash flows at periodic intervals based on a notional principal amount. A centrally cleared OTC swap is a transaction executed between a fund and a dealer counterparty, then cleared by a futures commission merchant (FCM) through a clearinghouse. Once cleared, the clearinghouse serves as a central counterparty, with whom a fund exchanges cash flows for the life of the transaction, similar to transactions in futures contracts.
Centrally cleared OTC swaps require a fund to deposit either cash or securities (initial margin) with the FCM, at the instruction of and for the benefit of the clearinghouse. Securities deposited to meet initial margin requirements are identified in the Schedule of Investments. Centrally cleared OTC swaps are marked-to-market daily and subsequent payments (variation margin) are made or received depending on the daily fluctuations in the value of the swaps and are recorded as unrealized appreciation or (depreciation). These daily payments, if any, are included in receivable or payable for daily variation margin on centrally cleared OTC swaps in the Statement of Assets and Liabilities. Any premiums for centrally cleared OTC swaps are recorded periodically throughout the term of the swap to variation margin and included in unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. Any premiums are recognized as realized gain (loss) upon termination or maturity of the swap.
Payments are exchanged at specified intervals, accrued daily commencing with the effective date of the contract and recorded as realized gain or (loss). Some swaps may be terminated prior to the effective date and realize a gain or loss upon termination. The net realized gain (loss) and change in net unrealized appreciation (depreciation) on swaps during the period is presented in the Statement of Operations.
Any open swaps at period end are included in the Schedule of Investments under the caption "Swaps" and are representative of volume of activity during the period.
Interest Rate Swaps. Interest rate swaps are agreements between counterparties to exchange cash flows, one based on a fixed rate, and the other on a floating rate. The Fund entered into interest rate swaps to manage its exposure to interest rate changes. Changes in interest rates can have an effect on both the value of bond holdings as well as the amount of interest income earned. In general, the value of bonds can fall when interest rates rise and can rise when interest rates fall.
5. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, are noted in the table below.
| | Purchases ($) | Sales ($) |
| Fidelity GNMA Fund | 6,471,176 | 6,484,120 |
6. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and an annualized group fee rate that averaged .10% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annual management fee rate was .30% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing and shareholder servicing agent. FIIOC receives an asset-based fee of .10% of the Fund's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements.
Fund Wide Operations Fee. Pursuant to the Fund Wide Operations and Expense Agreement (FWOE), the investment adviser has agreed to provide for fund level expenses (which do not include transfer agent, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% of the Fund's average net assets less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .05% of average net assets.
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note.
Other. During the period, the investment adviser reimbursed the Fund for certain losses in the amount of $36.
7. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Commitment fees on the Statement of Operations, and are as follows:
| | Amount |
| Fidelity GNMA Fund | $11 |
During the period, there were no borrowings on this line of credit.
8. Expense Reductions.
Through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses by $3.
9. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
10. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Fidelity Income Fund and Shareholders of Fidelity GNMA Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Fidelity GNMA Fund (one of the funds constituting Fidelity Income Fund, referred to hereafter as the “Fund”) as of July 31, 2020, the related statement of operations for the year ended July 31, 2020, the statement of changes in net assets for each of the two years in the period ended July 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended July 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of July 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended July 31, 2020 and the financial highlights for each of the five years in the period ended July 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of July 31, 2020 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 14, 2020
We have served as the auditor of one or more investment companies in the Fidelity group of funds since 1932.
Trustees and Officers
The Trustees, Members of the Advisory Board (if any), and officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, oversee management of the risks associated with such activities and contractual arrangements, and review the fund's performance. Each of the Trustees oversees 280 funds.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) of the trust and the fund is referred to herein as an Independent Trustee. Each Independent Trustee shall retire not later than the last day of the calendar year in which his or her 75th birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. Officers and Advisory Board Members hold office without limit in time, except that any officer or Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Experience, Skills, Attributes, and Qualifications of the Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.
In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below.
Board Structure and Oversight Function. Abigail P. Johnson is an interested person and currently serves as Chairman. The Trustees have determined that an interested Chairman is appropriate and benefits shareholders because an interested Chairman has a personal and professional stake in the quality and continuity of services provided to the fund. Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Independent Trustees have determined that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute a substantial majority for the Board. The Independent Trustees also regularly meet in executive session. Arthur E. Johnson serves as Chairman of the Independent Trustees and as such (i) acts as a liaison between the Independent Trustees and management with respect to matters important to the Independent Trustees and (ii) with management prepares agendas for Board meetings.
Fidelity® funds are overseen by different Boards of Trustees. The fund's Board oversees Fidelity's investment-grade bond, money market, asset allocation and certain equity funds, and other Boards oversee Fidelity's high income and other equity funds. The asset allocation funds may invest in Fidelity® funds that are overseen by such other Boards. The use of separate Boards, each with its own committee structure, allows the Trustees of each group of Fidelity® funds to focus on the unique issues of the funds they oversee, including common research, investment, and operational issues. On occasion, the separate Boards establish joint committees to address issues of overlapping consequences for the Fidelity® funds overseen by each Board.
The Trustees operate using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the fund, and fund shareholders and to facilitate compliance with legal and regulatory requirements and oversight of the fund's activities and associated risks. The Board, acting through its committees, has charged FMR and its affiliates with (i) identifying events or circumstances the occurrence of which could have demonstrably adverse effects on the fund's business and/or reputation; (ii) implementing processes and controls to lessen the possibility that such events or circumstances occur or to mitigate the effects of such events or circumstances if they do occur; and (iii) creating and maintaining a system designed to evaluate continuously business and market conditions in order to facilitate the identification and implementation processes described in (i) and (ii) above. Because the day-to-day operations and activities of the fund are carried out by or through FMR, its affiliates, and other service providers, the fund's exposure to risks is mitigated but not eliminated by the processes overseen by the Trustees. While each of the Board's committees has responsibility for overseeing different aspects of the fund's activities, oversight is exercised primarily through the Operations and Audit Committees. In addition, an ad hoc Board committee of Independent Trustees has worked with FMR to enhance the Board's oversight of investment and financial risks, legal and regulatory risks, technology risks, and operational risks, including the development of additional risk reporting to the Board. Appropriate personnel, including but not limited to the fund's Chief Compliance Officer (CCO), FMR's internal auditor, the independent accountants, the fund's Treasurer and portfolio management personnel, make periodic reports to the Board's committees, as appropriate, including an annual review of Fidelity's risk management program for the Fidelity® funds. The responsibilities of each standing committee, including their oversight responsibilities, are described further under "Standing Committees of the Trustees."
Interested Trustees*:
Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+
Abigail P. Johnson (1961)
Year of Election or Appointment: 2009
Trustee
Chairman of the Board of Trustees
Ms. Johnson also serves as Trustee of other Fidelity® funds. Ms. Johnson serves as Chairman (2016-present), Chief Executive Officer (2014-present), and Director (2007-present) of FMR LLC (diversified financial services company), President of Fidelity Financial Services (2012-present) and President of Personal, Workplace and Institutional Services (2005-present). Ms. Johnson is Chairman and Director of Fidelity Management & Research Company LLC (investment adviser firm, 2011-present). Previously, Ms. Johnson served as Chairman and Director of FMR Co., Inc. (investment adviser firm, 2011-2019), Vice Chairman (2007-2016) and President (2013-2016) of FMR LLC, President and a Director of Fidelity Management & Research Company (2001-2005), a Trustee of other investment companies advised by Fidelity Management & Research Company, Fidelity Investments Money Management, Inc. (investment adviser firm), and FMR Co., Inc. (2001-2005), Senior Vice President of the Fidelity® funds (2001-2005), and managed a number of Fidelity® funds. Ms. Abigail P. Johnson and Mr. Arthur E. Johnson are not related.
Jennifer Toolin McAuliffe (1959)
Year of Election or Appointment: 2016
Trustee
Ms. McAuliffe also serves as Trustee of other Fidelity® funds. Previously, Ms. McAuliffe served as Co-Head of Fixed Income of Fidelity Investments Limited (now known as FIL Limited (FIL)) (diversified financial services company), Director of Research for FIL’s credit and quantitative teams in London, Hong Kong and Tokyo and Director of Research for taxable and municipal bonds at Fidelity Investments Money Management, Inc. Ms. McAuliffe previously served as a member of the Advisory Board of certain Fidelity® funds (2016). Ms. McAuliffe was previously a lawyer at Ropes & Gray LLP and currently serves as director or trustee of several not-for-profit entities.
* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.
+ The information includes the Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to the Trustee's qualifications to serve as a Trustee, which led to the conclusion that the Trustee should serve as a Trustee for the fund.
Independent Trustees:
Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Year of Birth; Principal Occupations and Other Relevant Experience+
Elizabeth S. Acton (1951)
Year of Election or Appointment: 2013
Trustee
Ms. Acton also serves as Trustee of other Fidelity® funds. Prior to her retirement, Ms. Acton served as Executive Vice President, Finance (2011-2012), Executive Vice President, Chief Financial Officer (2002-2011) and Treasurer (2004-2005) of Comerica Incorporated (financial services). Prior to joining Comerica, Ms. Acton held a variety of positions at Ford Motor Company (1983-2002), including Vice President and Treasurer (2000-2002) and Executive Vice President and Chief Financial Officer of Ford Motor Credit Company (1998-2000). Ms. Acton currently serves as a member of the Board and Audit and Finance Committees of Beazer Homes USA, Inc. (homebuilding, 2012-present). Ms. Acton previously served as a member of the Advisory Board of certain Fidelity® funds (2013-2016).
Ann E. Dunwoody (1953)
Year of Election or Appointment: 2018
Trustee
General Dunwoody also serves as Trustee of other Fidelity® funds. General Dunwoody (United States Army, Retired) was the first woman in U.S. military history to achieve the rank of four-star general and prior to her retirement in 2012 held a variety of positions within the U.S. Army, including Commanding General, U.S. Army Material Command (2008-2012). General Dunwoody currently serves as President of First to Four LLC (leadership and mentoring services, 2012-present), a member of the Board and Nomination and Corporate Governance Committees of Kforce Inc. (professional staffing services, 2016-present) and a member of the Board of Automattic Inc. (software engineering, 2018-present). Previously, General Dunwoody served as a member of the Advisory Board and Nominating and Corporate Governance Committee of L3 Technologies, Inc. (communication, electronic, sensor and aerospace systems, 2013-2019) and a member of the Board and Audit and Sustainability and Corporate Responsibility Committees of Republic Services, Inc. (waste collection, disposal and recycling, 2013-2016). Ms. Dunwoody also serves on several boards for non-profit organizations, including as a member of the Board, Chair of the Nomination and Governance Committee and a member of the Audit Committee of Logistics Management Institute (consulting non-profit, 2012-present), a member of the Council of Trustees for the Association of the United States Army (advocacy non-profit, 2013-present), a member of the Board of Florida Institute of Technology (2015-present) and a member of the Board of ThanksUSA (military family education non-profit, 2014-present). General Dunwoody previously served as a member of the Advisory Board of certain Fidelity® funds (2018).
John Engler (1948)
Year of Election or Appointment: 2014
Trustee
Mr. Engler also serves as Trustee of other Fidelity® funds. Previously, Mr. Engler served as Governor of Michigan (1991-2003), President of the Business Roundtable (2011-2017) and interim President of Michigan State University (2018-2019). Mr. Engler currently serves as a member of the Board of K12 Inc. (technology-based education company, 2012-present). Previously, Mr. Engler served as a member of the Board of Universal Forest Products (manufacturer and distributor of wood and wood-alternative products, 2003-2019) and Trustee of The Munder Funds (2003-2014). Mr. Engler previously served as a member of the Advisory Board of certain Fidelity® funds (2014-2016).
Robert F. Gartland (1951)
Year of Election or Appointment: 2010
Trustee
Mr. Gartland also serves as Trustee of other Fidelity® funds. Prior to his retirement, Mr. Gartland held a variety of positions at Morgan Stanley (financial services, 1979-2007), including Managing Director (1987-2007) and Chase Manhattan Bank (1975-1978). Mr. Gartland previously served as Chairman and an investor in Gartland & Mellina Group Corp. (consulting, 2009-2019), as a member of the Board of National Securities Clearing Corporation (1993-1996) and as Chairman of TradeWeb (2003-2004).
Arthur E. Johnson (1947)
Year of Election or Appointment: 2008
Trustee
Chairman of the Independent Trustees
Mr. Johnson also serves as Trustee of other Fidelity® funds. Prior to his retirement, Mr. Johnson served as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor, 1999-2009). Mr. Johnson currently serves as a member of the Board of Booz Allen Hamilton (management consulting, 2011-present). Mr. Johnson previously served as a member of the Board of Eaton Corporation plc (diversified power management, 2009-2019) and a member of the Board of AGL Resources, Inc. (holding company, 2002-2016). Mr. Johnson previously served as Vice Chairman (2015-2018) of the Independent Trustees of certain Fidelity® funds. Mr. Arthur E. Johnson is not related to Ms. Abigail P. Johnson.
Michael E. Kenneally (1954)
Year of Election or Appointment: 2009
Trustee
Vice Chairman of the Independent Trustees
Mr. Kenneally also serves as Trustee of other Fidelity® funds. Prior to his retirement, Mr. Kenneally served as Chairman and Global Chief Executive Officer of Credit Suisse Asset Management and Executive Vice President and Chief Investment Officer of Bank of America Corporation. Earlier roles at Bank of America included Director of Research, Senior Portfolio Manager for various institutional equity accounts and mutual funds and Portfolio Manager for a number of institutional fixed-income clients. Mr. Kenneally began his career as a Research Analyst in 1983 and was awarded the Chartered Financial Analyst (CFA) designation in 1991.
Marie L. Knowles (1946)
Year of Election or Appointment: 2001
Trustee
Ms. Knowles also serves as Trustee of other Fidelity® funds. Prior to her retirement, Ms. Knowles held several positions at Atlantic Richfield Company (diversified energy), including Executive Vice President and Chief Financial Officer (1996-2000), Senior Vice President (1993-1996) and President of ARCO Transportation Company (pipeline and tanker operations, 1993-1996). Ms. Knowles currently serves as a member of the Board of McKesson Corporation (healthcare service, since 2002), a member of the Board of the Santa Catalina Island Company (real estate, 2009-present), a member of the Investment Company Institute Board of Governors and a member of the Governing Council of the Independent Directors Council (2014-present). Ms. Knowles also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Ms. Knowles previously served as Chairman (2015-2018) and Vice Chairman (2012-2015) of the Independent Trustees of certain Fidelity® funds.
Mark A. Murray (1954)
Year of Election or Appointment: 2016
Trustee
Mr. Murray also serves as Trustee of other Fidelity® funds. Previously, Mr. Murray served as Co-Chief Executive Officer (2013-2016), President (2006-2013) and Vice Chairman (2013-2020) of Meijer, Inc. Mr. Murray serves as a member of the Board and Nuclear Review and Public Policy and Responsibility Committees of DTE Energy Company (diversified energy company, 2009-present) and a member of the Board and Audit Committee and Chairman of the Nominating and Corporate Governance Committee of Universal Forest Products, Inc. (manufacturer and distributor of wood and wood-alternative products, 2004-2016). Mr. Murray previously served as a member of the Board of Spectrum Health (not-for-profit health system, 2015-2019). Mr. Murray also serves as a member of the Board of many community and professional organizations. Mr. Murray previously served as a member of the Advisory Board of certain Fidelity® funds (2016).
+ The information includes the Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to the Trustee's qualifications to serve as a Trustee, which led to the conclusion that the Trustee should serve as a Trustee for the fund.
Advisory Board Members and Officers:
Correspondence intended for an officer may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.
Name, Year of Birth; Principal Occupation
Elizabeth Paige Baumann (1968)
Year of Election or Appointment: 2017
Anti-Money Laundering (AML) Officer
Ms. Baumann also serves as AML Officer of other funds. She is Chief AML Officer (2012-present) and Senior Vice President (2014-present) of FMR LLC (diversified financial services company) and is an employee of Fidelity Investments. Previously, Ms. Baumann served as AML Officer of certain funds (2017-2019), as AML Officer of the funds (2012-2016), and Vice President (2007-2014) and Deputy Anti-Money Laundering Officer (2007-2012) of FMR LLC.
Craig S. Brown (1977)
Year of Election or Appointment: 2019
Assistant Treasurer
Mr. Brown also serves as Assistant Treasurer of other funds. Mr. Brown is an employee of Fidelity Investments (2013-present).
John J. Burke III (1964)
Year of Election or Appointment: 2018
Chief Financial Officer
Mr. Burke also serves as Chief Financial Officer of other funds. Mr. Burke serves as Head of Investment Operations for Fidelity Fund and Investment Operations (2018-present) and is an employee of Fidelity Investments (1998-present). Previously Mr. Burke served as head of Asset Management Investment Operations (2012-2018).
David J. Carter (1973)
Year of Election or Appointment: 2020
Assistant Secretary
Mr. Carter also serves as Assistant Secretary of other funds. Mr. Carter serves as Vice President, Associate General Counsel (2010-present) and is an employee of Fidelity Investments (2005-present).
Jonathan Davis (1968)
Year of Election or Appointment: 2010
Assistant Treasurer
Mr. Davis also serves as Assistant Treasurer of other funds. Mr. Davis serves as Assistant Treasurer of FMR Capital, Inc. (2017-present) and is an employee of Fidelity Investments. Previously, Mr. Davis served as Vice President and Associate General Counsel of FMR LLC (diversified financial services company, 2003-2010).
Laura M. Del Prato (1964)
Year of Election or Appointment: 2018
President and Treasurer
Ms. Del Prato also serves as an officer of other funds. Ms. Del Prato is an employee of Fidelity Investments (2017-present). Previously, Ms. Del Prato served as President and Treasurer of The North Carolina Capital Management Trust: Cash Portfolio and Term Portfolio (2018-2020). Prior to joining Fidelity Investments, Ms. Del Prato served as a Managing Director and Treasurer of the JPMorgan Mutual Funds (2014-2017). Prior to JPMorgan, Ms. Del Prato served as a partner at Cohen Fund Audit Services (accounting firm, 2012-2013) and KPMG LLP (accounting firm, 2004-2012).
Colm A. Hogan (1973)
Year of Election or Appointment: 2016
Assistant Treasurer
Mr. Hogan also serves as an officer of other funds. Mr. Hogan serves as Assistant Treasurer of FMR Capital, Inc. (2017-present) and is an employee of Fidelity Investments (2005-present). Previously, Mr. Hogan served as Deputy Treasurer of certain Fidelity® funds (2016-2020) and Assistant Treasurer of certain Fidelity® funds (2016-2018).
Cynthia Lo Bessette (1969)
Year of Election or Appointment: 2019
Secretary and Chief Legal Officer (CLO)
Ms. Lo Bessette also serves as an officer of other funds. Ms. Lo Bessette serves as CLO, Secretary, and Senior Vice President of Fidelity Management & Research Company LLC (investment adviser firm, 2019-present); and CLO of Fidelity Management & Research (Hong Kong) Limited, FMR Investment Management (UK) Limited, and Fidelity Management & Research (Japan) Limited (investment adviser firms, 2019-present). She is a Senior Vice President and Deputy General Counsel of FMR LLC (diversified financial services company, 2019-present), and is an employee of Fidelity Investments. Previously, Ms. Lo Bessette served as CLO, Secretary, and Senior Vice President of FMR Co., Inc. (investment adviser firm, 2019); Secretary of Fidelity SelectCo, LLC and Fidelity Investments Money Management, Inc. (investment adviser firms, 2019). Prior to joining Fidelity Investments, Ms. Lo Bessette was Executive Vice President, General Counsel (2016-2019) and Senior Vice President, Deputy General Counsel (2015-2016) of OppenheimerFunds (investment management company) and Deputy Chief Legal Officer (2013-2015) of Jennison Associates LLC (investment adviser firm).
Chris Maher (1972)
Year of Election or Appointment: 2013
Assistant Treasurer
Mr. Maher also serves as an officer of other funds. Mr. Maher serves as Assistant Treasurer of FMR Capital, Inc. (2017-present), and is an employee of Fidelity Investments (2008-present). Previously, Mr. Maher served as Assistant Treasurer of certain funds (2013-2020); Vice President of Asset Management Compliance (2013), Vice President of the Program Management Group of FMR (investment adviser firm, 2010-2013), and Vice President of Valuation Oversight (2008-2010).
Jamie Pagliocco (1964)
Year of Election or Appointment: 2020
Vice President
Mr. Pagliocco also serves as Vice President of other funds. Mr. Pagliocco serves as President of Fixed Income (2020-present), and is an employee of Fidelity Investments (2001-present). Previously, Mr. Pagliocco served as Co-Chief Investment Officer – Bond (2017-2020), Global Head of Bond Trading (2016-2019), and as a portfolio manager.
Kenneth B. Robins (1969)
Year of Election or Appointment: 2020
Chief Compliance Officer
Mr. Robins also serves as an officer of other funds. Mr. Robins serves as Compliance Officer of Fidelity Management & Research Company LLC (investment adviser firm, 2016-present) and is an employee of Fidelity Investments (2004-present). Previously, Mr. Robins served as Compliance Officer of FMR Co., Inc. (investment adviser firm, 2016-2019), as Executive Vice President of Fidelity Investments Money Management, Inc. (investment adviser firm, 2013-2016) and served in other fund officer roles.
Stacie M. Smith (1974)
Year of Election or Appointment: 2013
Assistant Treasurer
Ms. Smith also serves as an officer of other funds. Ms. Smith serves as Assistant Treasurer of FMR Capital, Inc. (2017-present), is an employee of Fidelity Investments (2009-present), and has served in other fund officer roles. Prior to joining Fidelity Investments, Ms. Smith served as Senior Audit Manager of Ernst & Young LLP (accounting firm, 1996-2009). Previously, Ms. Smith served as Assistant Treasurer (2013-2019) and Deputy Treasurer (2013-2016) of certain Fidelity® funds.
Marc L. Spector (1972)
Year of Election or Appointment: 2016
Deputy Treasurer
Mr. Spector also serves as an officer of other funds. Mr. Spector serves as Assistant Treasurer of FMR Capital, Inc. (2017-present) and is an employee of Fidelity Investments (2016-present). Prior to joining Fidelity Investments, Mr. Spector served as Director at the Siegfried Group (accounting firm, 2013-2016), and prior to Siegfried Group as audit senior manager at Deloitte & Touche LLP (accounting firm, 2005-2013).
Jim Wegmann (1979)
Year of Election or Appointment: 2019
Assistant Treasurer
Mr. Wegmann also serves as Assistant Treasurer of other funds. Mr. Wegmann is an employee of Fidelity Investments (2011-present).
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2020 to July 31, 2020).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
February 1, 2020 | Ending
Account Value
July 31, 2020 | Expenses Paid
During Period-B
February 1, 2020
to July 31, 2020 |
| Fidelity GNMA Fund | .45% | | | |
| Actual | | $1,000.00 | $1,028.20 | $2.27 |
| Hypothetical-C | | $1,000.00 | $1,022.63 | $2.26 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/ 366 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Distributions (Unaudited)
A total of 0.45% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $45,014,122 of distributions paid during the period January 01, 2020 to July 31, 2020 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2021 of amounts for use in preparing 2020 income tax returns.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2018 through November 30, 2019. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
MOG-ANN-0920
1.930526.109
